Based on our analysis, we expect NHPC to be able to increase generation, particularly from its hydro-power plants in the north-eastern region.
During Apr-Jun 2009, NHPC’s generation was 2.4% higher than that in April-June 2008, and 5.5% above the targets for the same period.
Jaiprakash Hydro, whose entire hydro capacities are in the northern region, was the worst affected with its hydro generation for April-June 2009 dropping 10.3% y-o-y to 946MUs.
Tata Power’s (Not Rated) all three hydro-power stations are in the western region and have largely not been impacted. Tata Power’s hydro-power stations generated 369MUs in the period April-July 2009, up 10.3% from the corresponding previous period.
While utilities such as Tata Power and Torrent Power would benefit to the limited extent of merchant capacity, utilities such as GMR Infrastructure, Adani Power etc. which have larger merchant power capacities would benefit in the short term from higher merchant / spot prices.
In addition, players in the metals sector such as JSPL, JSW, Nava Bharat Ventures etc., with large captive power plants, would also benefit.
Power trading firms such as PTC would benefit only due to increased volumes, as their margin on inter-state power trading is capped by regulation.
All the other major players in hydro-power generation are either unlisted or have projects which are still in the development/construction phase (GMR Infrastructure, GVK Power & Infrastructure, Lanco Infratech, NTPC etc.).
We have a SELL rating on both GMR Infrastructure and NTPC. Our target price for GMR Infrastructure is Rs110, while that for NTPC is Rs205.